Jayshree Rajendra Shroff & Ors. Vs. Appropriate Authority, Ahmedabad
EmailAppeal: Civil Appeal No. 5298 of 2001
Petitioner: Jayshree Rajendra Shroff & Ors.
Respondent: Appropriate Authority, Ahmedabad
Apeal: Civil Appeal No. 5298 of 2001
Judges: RUMA PAL & B.N. SRIKRISHNA, JJ.
Date of Judgment: Oct 30, 2002
Head Note:
INCOME TAX
Income Tax Act, 1961
Sections 269 – UG, 269 UD – Pre-emptive purchase – Orders of – When abrogated – Agreement between owner and purchaser for sale of property – Notice given – Price sought to be justified – Authorities however not satisfied and orders passed – No transfer of payment to transferees – Payment not made allegedly on the ground that transferor failed to deliver vacant possession within time – Amount deposited with appropriate authority. Held that purchase order stood abrogated by act of depositing the amount with appropriate authority.
Held:
The purchase order itself had directed the central government to tender payment of the consideration at least at the time of asking for possession. There is no doubt that the purchase order was passed under section 269-UD of the Act and the property vested in the central government in terms of the agreement of the transfer. Under clause 3 of the agreement of transfer the payment of consideration was a pre-condition to the handing over of possession by the transferor. It was not open to the central government to have demanded possession as a pre-condition for making the payment. (Para 5)
The High Court, however, refused the prayer of the appellants seeking a declaration of abrogation under section 269-UH of the Act for an altogether different reason from that put forward by the central government in its letter dated 12.7.2000. According to the High Court, because Advani had, subsequent to the purchase order, filed a suit in which he had claimed a permanent injunction against dispossession from the property in question. The High Court proceeded on the basis that there was a possibility of the suit being decreed in favour of Advani and of Advani being declared tenant in respect of the property in which event he would be a person interested in the property and hence interested in the consideration within the meaning of the definition of the word ‘person’ interested. (Para 7)
In the first place, the High Court should not have considered a ground not put forward by the government itself for not making payment of the consideration in terms of section 269-UG vide Mohinder Singh Gill and Anr. v. The Chief Election Commissioner, New Delhi & Ors. 1978 (1) SCC 405. (Para 8)
In the second place section 269-UG provides that deposit may be made by the central government instead of making payment to the transferor only in the circumstances specified in sub-section (2) and (3) of section 269-UG. (Para 9)
Advani has made no claim to the consideration at all. Advani has impugned the order under section 269 UD. The reasoning of the High Court therefore appears to be entirely hypothetical. The status of Advani’s suit as at present, is not clear. The suit is being contested by the respondents by filing a written statement in which the respondents have reiterated that the property has been taken in the purchase order issued under section 269-UD of the Act and have also stated that the suit is not main tainable by virtue of the provisions of section 269-UN and section 293 of the Act. It is in any event not open to the central government to have withheld the payment on a basis which has been rejected in the purchase order and which is contrary to the stand taken by it in its written statement filed in Advani’s suit. (Para 9)
Cases Reffered:
1. Mohinder Singh Gill and Anr. v. The Chief Election Commissioner, New Delhi & Ors. (1978 (1) SCC 405.) (Para 8)
JUDGEMENT:
ORDER
1. This appeal has been preferred from an order passed by the High Court rejecting the writ application of the appellants in which the appellants had inter alia sought for a declaration that an order of purchase passed under section 269-UD of the Income Tax Act, 1961 had stood abrogated by reason of the failure of the central government to pay or deposit the amount of consideration in terms of section 269-UG of the Act.
2. An agreement has been entered into between appellant no. 4 and the appellants 1 to 3 of whereby appellant no. 4 was to sell the property to the first three appellants for a consideration of Rs. 61 lakhs. The agreement to sell insofar as it is relevant reads thus:
At present the vendor has kept a security person to maintain and guard the said property. The vendor undertake that, at the time of vacant and peaceful possession, the said security guard should be removed by the vendor at her own cost and responsibility. The vendor will handover the vacant and peaceful possession of the said property only after receiving the entire consideration of Rs. 61,00,000/-.
3. Proceedings for pre-emptive purchase of the property were initiated under chapter-XX C of the Act by the respondents in respect of the transaction in question. The appellants were given an opportunity of being heard. They sought to justify the consideration at which the property had been sold before the appropriate authority. It was also drawn to the notice of the appropriate authority that the caretaker of the property was one Mr. Mohan K. Advani who was in possession of the property. In view of this statement, a copy of the show cause notice was issued under section 269-UD-1A of the Act to the said Advani. In response to the notice Advani claimed to be a tenant in respect of the property. However, when he was called upon to substantiate his claim before the appropriate authority, the said Advani did not reply nor did he seek to produce any evidence whatsoever in support of his claim. A further notice was issued to the said Advani by the appropriate authority informing him that the authority proposed to hold that he (Advani) had no right/interest in the property and that the property would vest in the central government free from any encumbrances as far as Advani’s claim was concerned after an order under section 269 UD (1) of the Act was passed for pre-emptive purchase of the property. There was no response to this letter by Advani. Accordingly, an order was passed by the appropriate authority under section 269 UD(1) of the Act in which it was clearly recorded that Advani did not have any tenancy right in the property and that his claim of being appointed as a caretaker, or that his salary was being adjusted towards the rent of the property was ill-founded and not backed by any evidence. It was stated that it was beyond any “shadow of doubt” that Advani had no legal right in the property. The appropriate authority ordered pre-emptive purchase of the property on 17.05.2000 and directed;
“The central government shall pay, by way of consideration an amount of Rs. 58,45,441/- (Rs. 50,000/- being share of the transferor in society’s transfer fees) in accordance with the provisions of section 269 UF(1) of the Income Tax Act, 1961. The said amount of consideration is to be paid to the transferor as she has been shown as the only person interested in consideration (ref. col. 13 of annexure to 37-1) while rendering the payment, the central government shall insist upon, among others, fulfilment of conditions contained in the agreement dated 31.10.1999, particularly clause 3 of the agreement whereby the vendor is bound to handover peaceful and vacant possession to the purchaser. From today onwards the said P.U.C. shall vest in the central government free from all encumbrances.”
4. However, there was no tender of payment of the consideration by the central government inspite of repeated demands by the transferees who had, in the meanwhile admittedly paid the entire consideration money to the transferor. According to the central government no payment was made of the consideration either to the transferor or transferees on the ground, as stated in the letter dated 12.07.2000 from the office of the chief commissioner of income tax Pune, that the transferor had “failed to hand over vacant and peaceful possession of the property within the limit allowed.” The central government deposited the purchase consideration amounting to Rs. 58,45,441/- in the account of the appropriate authority, Ahmedabad on 29.06.2000. The transferor and the transferees then joined together to challenge this deposit made by the central government purportedly in compliance with section 269-UG of the Act. They filed a writ application before the High Court assailing not only the order of pre-emptive purchase but also the deposit of purchase consideration on the ground that (a) the order of pre-emptive purchase was passed on the incorrect assumption that the sale consideration did not represent the real market value and (b) that the pre-conditions which would allow a deposit to be made of the consideration as provided in section 269-UG sub-section (2) had not been fulfilled in this case. In view of this default, the appellants claimed a declaration of abrogation of the pre-emptive purchase in terms of sub-section (1) of section 269-UH of the Act and for restoration of possession of the property either to the appellant no. 4 the transferor or to appellants 1 to 3, the transferees.
5. The High Court rejected the challenge to the order under section 269-UD. The appellants have not sought to reopen this finding before us. The only issue before us is whether there was a deposit as permitted under section 269-UG or whether there had been a default entitling the appellants to abrogation and re-vesting under section 269 UH of the Act. The High Court found that the refusal to make payment of the consideration to the transferor or to transferees on the ground of re-delivery of possession was untenable and was in any event not a ground which permitted deposit of the consideration with the appropriate authority under any of the sub-sections of section 269-UG of the Act. In our view, the High Court’s view on this aspect of the matter cannot be faulted. Apart from the reasoning stated in the judgment, it is clear that the purchase order itself had directed the central government to tender payment of the consideration at least at the time of asking for possession. We have not found any evidence that there was any such tender made by the central government of the consideration money either to the transferees or the transferor. Furthermore there is no doubt that the purchase order was passed under section 269-UD of the Act and the property vested in the central government in terms of the agreement of the transfer. We have already noticed that under clause 3 of the agreement of transfer the payment of consideration was a pre-condition to the handing over of possession by the transferor. It was not open to the central government to have demanded possession as a pre-condition for making the payment.
6. An argument was sought to be raised before us by the respondent that as far as the transferor was concerned, she had in fact received the consideration in terms of clause-3 from the transferees and, therefore, she was bound to make over possession in terms of the agreement. We are unable to accept this submission. It was certainly not raised, perhaps advisedly, before the High Court. It is also clear that whereas clause-3 makes or obliges the transferor to hand over possession to the central government because she had received the consideration, there was no such pre-condition as far as the transferees were concerned. They had made payment of the purchase price and were under no further obligation in terms of the agreement either vis-a-vis the transferor or any third party before they could receive the purchase price from the central government. The central government could not take advantage of the payment made by the transferees to the transferor and step into the shoes of the transferees vis-a-vis the transferor without reimbursing the transferees.
7. The High Court, however, refused the prayer of the appellants seeking a declaration of abrogation under section 269-UH of the Act for an altogether different reason from that put forward by the central government in its letter dated 12.7.2000. According to the High Court, because Advani had, subsequent to the purchase order, filed a suit in which he had claimed a permanent injunction against dispossession from the property in question. The High Court proceeded on the basis that there was a possibility of the suit being decreed in favour of Advani and of Advani being declared tenant in respect of the property in which event he would be a person interested in the property and hence interested in the consideration within the meaning of the definition of the word ‘person’ interested in chapter XX-C and therefore, it could be said that there was a dispute relating to the entitlement to the consideration justifying the central government in withholding payment and making deposit of the same.
8. In the first place, the High Court should not have considered a ground not put forward by the government itself for not making payment of the consideration in terms of section 269-UG vide Mohinder Singh Gill and Anr. v. The Chief Election Commissioner, New Delhi & Ors.1 .
9. In the second place section 269-UG provides that deposit may be made by the central government instead of making payment to the transferor only in the circumstances specified in sub-section (2) and (3) of section 269-UG. Sub-section (2) says that “if any dispute arises as to the apportionment of the amount of consideration amongst persons claiming to be entitled thereto”, and sub-section (3) provides that “if the person entitled to the amount of consideration does not consent to receive it, or if there is any dispute as to the title to receive the amount of consideration”, then only must the central government deposit with the appropriate authority the amount of consideration. A reading of the plaint in Advani’s suit would show that Advani has made no claim to the consideration at all. Advani has impugned the order under section 269 UD. The reasoning of the High Court therefore appears to be entirely hypothetical. The status of Advani’s suit as at present, is not clear. The suit is being contested by the respondents by filing a written statement in which the respondents have reiterated that the property has been taken in the purchase order issued under section 269-UD of the Act and have also stated that the suit is not maintainable by virtue of the provisions of section 269-UN and section 293 of the Act. It is in any event not open to the central government to have withheld the payment on a basis which has been rejected in the purchase order and which is contrary to the stand taken by it in its written statement filed in Advani’s suit.
10. For these reasons we set aside the order of the High Court and grant a declaration that the purchase order stood abrogated by reason of the default committed by the central government, in terms of section 269-UH(1).
The appeal is allowed. There will be no order as to costs.
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1. This appeal has been preferred from an order passed by the High Court rejecting the writ application of the appellants in which the appellants had inter alia sought for a declaration that an order of purchase passed under section 269-UD of the Income Tax Act, 1961 had stood abrogated by reason of the failure of the central government to pay or deposit the amount of consideration in terms of section 269-UG of the Act.
2. An agreement has been entered into between appellant no. 4 and the appellants 1 to 3 of whereby appellant no. 4 was to sell the property to the first three appellants for a consideration of Rs. 61 lakhs. The agreement to sell insofar as it is relevant reads thus:
At present the vendor has kept a security person to maintain and guard the said property. The vendor undertake that, at the time of vacant and peaceful possession, the said security guard should be removed by the vendor at her own cost and responsibility. The vendor will handover the vacant and peaceful possession of the said property only after receiving the entire consideration of Rs. 61,00,000/-.
3. Proceedings for pre-emptive purchase of the property were initiated under chapter-XX C of the Act by the respondents in respect of the transaction in question. The appellants were given an opportunity of being heard. They sought to justify the consideration at which the property had been sold before the appropriate authority. It was also drawn to the notice of the appropriate authority that the caretaker of the property was one Mr. Mohan K. Advani who was in possession of the property. In view of this statement, a copy of the show cause notice was issued under section 269-UD-1A of the Act to the said Advani. In response to the notice Advani claimed to be a tenant in respect of the property. However, when he was called upon to substantiate his claim before the appropriate authority, the said Advani did not reply nor did he seek to produce any evidence whatsoever in support of his claim. A further notice was issued to the said Advani by the appropriate authority informing him that the authority proposed to hold that he (Advani) had no right/interest in the property and that the property would vest in the central government free from any encumbrances as far as Advani’s claim was concerned after an order under section 269 UD (1) of the Act was passed for pre-emptive purchase of the property. There was no response to this letter by Advani. Accordingly, an order was passed by the appropriate authority under section 269 UD(1) of the Act in which it was clearly recorded that Advani did not have any tenancy right in the property and that his claim of being appointed as a caretaker, or that his salary was being adjusted towards the rent of the property was ill-founded and not backed by any evidence. It was stated that it was beyond any “shadow of doubt” that Advani had no legal right in the property. The appropriate authority ordered pre-emptive purchase of the property on 17.05.2000 and directed;
“The central government shall pay, by way of consideration an amount of Rs. 58,45,441/- (Rs. 50,000/- being share of the transferor in society’s transfer fees) in accordance with the provisions of section 269 UF(1) of the Income Tax Act, 1961. The said amount of consideration is to be paid to the transferor as she has been shown as the only person interested in consideration (ref. col. 13 of annexure to 37-1) while rendering the payment, the central government shall insist upon, among others, fulfilment of conditions contained in the agreement dated 31.10.1999, particularly clause 3 of the agreement whereby the vendor is bound to handover peaceful and vacant possession to the purchaser. From today onwards the said P.U.C. shall vest in the central government free from all encumbrances.”
4. However, there was no tender of payment of the consideration by the central government inspite of repeated demands by the transferees who had, in the meanwhile admittedly paid the entire consideration money to the transferor. According to the central government no payment was made of the consideration either to the transferor or transferees on the ground, as stated in the letter dated 12.07.2000 from the office of the chief commissioner of income tax Pune, that the transferor had “failed to hand over vacant and peaceful possession of the property within the limit allowed.” The central government deposited the purchase consideration amounting to Rs. 58,45,441/- in the account of the appropriate authority, Ahmedabad on 29.06.2000. The transferor and the transferees then joined together to challenge this deposit made by the central government purportedly in compliance with section 269-UG of the Act. They filed a writ application before the High Court assailing not only the order of pre-emptive purchase but also the deposit of purchase consideration on the ground that (a) the order of pre-emptive purchase was passed on the incorrect assumption that the sale consideration did not represent the real market value and (b) that the pre-conditions which would allow a deposit to be made of the consideration as provided in section 269-UG sub-section (2) had not been fulfilled in this case. In view of this default, the appellants claimed a declaration of abrogation of the pre-emptive purchase in terms of sub-section (1) of section 269-UH of the Act and for restoration of possession of the property either to the appellant no. 4 the transferor or to appellants 1 to 3, the transferees.
5. The High Court rejected the challenge to the order under section 269-UD. The appellants have not sought to reopen this finding before us. The only issue before us is whether there was a deposit as permitted under section 269-UG or whether there had been a default entitling the appellants to abrogation and re-vesting under section 269 UH of the Act. The High Court found that the refusal to make payment of the consideration to the transferor or to transferees on the ground of re-delivery of possession was untenable and was in any event not a ground which permitted deposit of the consideration with the appropriate authority under any of the sub-sections of section 269-UG of the Act. In our view, the High Court’s view on this aspect of the matter cannot be faulted. Apart from the reasoning stated in the judgment, it is clear that the purchase order itself had directed the central government to tender payment of the consideration at least at the time of asking for possession. We have not found any evidence that there was any such tender made by the central government of the consideration money either to the transferees or the transferor. Furthermore there is no doubt that the purchase order was passed under section 269-UD of the Act and the property vested in the central government in terms of the agreement of the transfer. We have already noticed that under clause 3 of the agreement of transfer the payment of consideration was a pre-condition to the handing over of possession by the transferor. It was not open to the central government to have demanded possession as a pre-condition for making the payment.
6. An argument was sought to be raised before us by the respondent that as far as the transferor was concerned, she had in fact received the consideration in terms of clause-3 from the transferees and, therefore, she was bound to make over possession in terms of the agreement. We are unable to accept this submission. It was certainly not raised, perhaps advisedly, before the High Court. It is also clear that whereas clause-3 makes or obliges the transferor to hand over possession to the central government because she had received the consideration, there was no such pre-condition as far as the transferees were concerned. They had made payment of the purchase price and were under no further obligation in terms of the agreement either vis-a-vis the transferor or any third party before they could receive the purchase price from the central government. The central government could not take advantage of the payment made by the transferees to the transferor and step into the shoes of the transferees vis-a-vis the transferor without reimbursing the transferees.
7. The High Court, however, refused the prayer of the appellants seeking a declaration of abrogation under section 269-UH of the Act for an altogether different reason from that put forward by the central government in its letter dated 12.7.2000. According to the High Court, because Advani had, subsequent to the purchase order, filed a suit in which he had claimed a permanent injunction against dispossession from the property in question. The High Court proceeded on the basis that there was a possibility of the suit being decreed in favour of Advani and of Advani being declared tenant in respect of the property in which event he would be a person interested in the property and hence interested in the consideration within the meaning of the definition of the word ‘person’ interested in chapter XX-C and therefore, it could be said that there was a dispute relating to the entitlement to the consideration justifying the central government in withholding payment and making deposit of the same.
8. In the first place, the High Court should not have considered a ground not put forward by the government itself for not making payment of the consideration in terms of section 269-UG vide Mohinder Singh Gill and Anr. v. The Chief Election Commissioner, New Delhi & Ors.1 .
9. In the second place section 269-UG provides that deposit may be made by the central government instead of making payment to the transferor only in the circumstances specified in sub-section (2) and (3) of section 269-UG. Sub-section (2) says that “if any dispute arises as to the apportionment of the amount of consideration amongst persons claiming to be entitled thereto”, and sub-section (3) provides that “if the person entitled to the amount of consideration does not consent to receive it, or if there is any dispute as to the title to receive the amount of consideration”, then only must the central government deposit with the appropriate authority the amount of consideration. A reading of the plaint in Advani’s suit would show that Advani has made no claim to the consideration at all. Advani has impugned the order under section 269 UD. The reasoning of the High Court therefore appears to be entirely hypothetical. The status of Advani’s suit as at present, is not clear. The suit is being contested by the respondents by filing a written statement in which the respondents have reiterated that the property has been taken in the purchase order issued under section 269-UD of the Act and have also stated that the suit is not maintainable by virtue of the provisions of section 269-UN and section 293 of the Act. It is in any event not open to the central government to have withheld the payment on a basis which has been rejected in the purchase order and which is contrary to the stand taken by it in its written statement filed in Advani’s suit.
10. For these reasons we set aside the order of the High Court and grant a declaration that the purchase order stood abrogated by reason of the default committed by the central government, in terms of section 269-UH(1).
The appeal is allowed. There will be no order as to costs.
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